THIS RULING REPLACES THE RULING PUBLISHED ON 22 DECEMBER 2021. FOLLOWING INDEPENDENT REVIEW THE DECISION TO UPHOLD THE COMPLAINTS REMAINS UNCHANGED BUT ON REVISED GROUNDS.
On 8 October 2023 the FCA took over the regulation of ads for ‘qualifying cryptoassets’ – cryptoassets that are transferable and fungible, including cryptocurrencies and utility (fan) tokens – and introduced new rules. However, cryptoassets as a product remain unregulated. As of this date, complaints about misleading non-broadcast advertising for qualifying cryptoassets will be referred to the FCA for their consideration. The new rules do not cover cryptoassets that are non-fungible, such as Non-Fungible Tokens (NFTs), or Limited Payment Tokens that can only be redeemed with the issuer and used for the payments of specific goods and services, such as non-monetary customer loyalty points, and the ASA will continue to regulate all ads for these products.
A Facebook post and website for Arsenal Football Club:
a. The post on Arsenal’s Facebook page, posted on 12 August 2021, included text that stated, “$AFC in now live $CHZ” and “Ben White, Calum Chambers and Kieran Tierney have had their say… But what song do you want to hear when we win? Download the Socios app to get your token and vote”. The ad included a video featuring footballers Ben White, Calum Chambers and Kieran Tierney.
b. The website included a webpage published on 6 August 2021 with the title “$AFC Fan Token: Everything you need to know” and included information explaining what the Arsenal Fan Token was and the benefits that it offered. The page included text at the bottom that stated, “In order to buy $AFC fan tokens you need to purchase the cryptocurrency Chiliz. Please remember that the future value of Fan Tokens is dependent on supply and demand, and can therefore go up as well as down. Fans should be aware that they could lose some or all of their money invested. We advise you to spend only what you can afford and seek independent financial advice if required.”
The ASA challenged whether:
1. ads (a) and (b) were misleading because they failed to illustrate the risk of the investment;
2. ad (a) was misleading because it did not make clear that the tokens were cryptoassets, which could only be obtained by opening a cryptoassets exchange account, and in the case of paid-for fan tokens, required the purchase of another cryptocurrency; and
3. ads (a) and (b) were irresponsible because they took advantage of consumers’ inexperience or credulity and trivialised engaging with and investing in cryptoassets.
1. Arsenal Football Club plc said ad (b) was designed to educate fans about the Fan Engagement Programme, the benefits of owning Fan Tokens, how to redeem free tokens and buying additional ones using the cryptocurrency Chiliz. Because the purchase of Fan Tokens involved first buying the cryptocurrency Chiliz they included a warning in ad (b) making it clear that fans might not be able to get their money back because, once purchased, the value of Fan Tokens could go down as well as up. The warning also included the recommendation that fans should seek independent financial advice if required. Arsenal said that they urged fans to only purchase what they could afford, and reminded fans that they only needed to own one Fan Token to vote in polls and participate in competitions, so as to discourage over-spending. They said that, while they did not promote the Fan Tokens as tradable or state that they could be used for capital gain, and so in their view there was no requirement to include a warning, they believed inserting the warning in ad (b) was the responsible thing to do. They said the warning was in the body of the article, was transparent to consumers and explained that that the value of tradable tokens could go down as well as up and that cryptoassets were unregulated in the UK.
Arsenal said ad (a) was posted one week after ad (b). They believed therefore that fans would already be aware from ad (b) how Fan Tokens worked and could be purchased. The purpose of ad (a) was to highlight how Fan Tokens could be used to influence club decisions, which in that particular case meant picking which song would be played when the team won a match. They said the ad neither promoted the Fan Token as an investment for capital gain nor encouraged the trading of cryptocurrency. In addition, the purchase of Chiliz was not promoted as an investment or for its financial value.Arsenal said that neither post referred to the past performance of cryptocurrency or implied money could be made from Fan Tokens. Because, therefore, they were not ads for cryptocurrency investments, in their view there was no requirement to include a warning. However, they believed the warning they included in ad (b) was the responsible approach.
2. Arsenal believed that Fan Tokens and their relationship with cryptocurrency was widely understood by the target audience, as followers of the Arsenal Facebook page. Ad (a) was one of a series of promotional posts about the Fan Engagement Programme, which they said made it clear that, with the exception of the free non-tradable Fan Tokens gifted to members, all Fan Tokens had to be purchased by buying the cryptocurrency, Chiliz. In addition they said that the Socios app itself was clear that the purchase of Fan Tokens could only be made by buying Chiliz currency.
Arsenal believed Socios was well known in the footballing community as a cryptocurrency platform because they sponsored and partnered with a number of European football clubs. They therefore believed, in conjunction with the wider public, information about Fan Tokens and Socios, and the information provided in ad (b), ad (a) was clear and viewers of the post would understand that Fan Tokens had to be bought with cryptocurrency.
3. Arsenal said that they partnered with Socios to provide fans with access to a digital platform where they could interact with each other and collect Fan Tokens to influence and engage with club decisions. They said their Fan Engagement Programme was launched on 12 July 2021 when they announced the partnership with Socios and the launch of their Fan Tokens. All the subsequent promotional materials relating to Fan Tokens were designed to raise awareness of the inherent benefits of owning the tokens, and doing so permanently, in terms of offering fans the opportunity to interact with the Club such as the right to vote on official Club decisions. They said the Fan Tokens were not promoted as financial products or an investment vehicle and they did not encourage the trading of Fan Tokens. They explained that only one Fan Token would be needed to vote on Club decisions. They said that was supported by the Socios App which had a disclaimer that stated, “Fan Tokens do not represent financial instruments or any form of financial product. They are meant to be used for entertainment and fan experience purposes only.”
Arsenal explained there were two versions of the Fan Tokens: a free, non-transferable and non-tradable version of the Fan Token and a paid for, transferable and tradable version of the Fan Token. The main benefit of the Fan Token was to help shape the club’s cultural activities and decisions by voting in polls open exclusively to Fan Token holders. They acknowledged that the polls would not steer the club’s business-critical decisions, but said that the ability to shape cultural touchpoints at the club was not trivial and promoting the benefits of doing so was not a breach of the Code. Importantly polls were not a gimmick or a way to promote Fan Tokens as an investment opportunity, the polls were actually the purpose and essence of the Fan Tokens.
Arsenal said that Fan Tokens were utility tokens used to encourage fan participation and therefore were materially different to cryptocurrencies which were virtual currencies used as a means of payment. Arsenal explained that the Fan Tokens were not specified investments under the Financial Services and Markets Act 2000. In addition, Arsenal said that when the ads were made available to the club’s followers, Fan Tokens could not be traded on the Socios app. Any trading facility was not available on the Socios app until six weeks after the publication of ad (b) and five weeks after the publication of ad (a).
Arsenal said that they believed that the Fan Tokens were promoted responsibly by reminding fans they only needed one token to vote in Club decisions, and that they should only purchase what they could afford. Arsenal said information on the website included risk warnings and the statement “seek independent financial advice if required”.
Arsenal said that ad (a), as part of a wider campaign, was published on the Club’s Facebook page on 12 August 2021 and was intended to draw supporter’s attention to the fact they could download a Fan Token. It was only intended to promote the single, free, non-tradeable Fan Token. The ad referred to “get your token” and did not mention buying or purchasing. In addition it used the word “token” singular and “your token” referred to the free Fan Token made available to members of the club.Arsenal believed that ad (a) was clear that all a member had to do to claim the Fan Token was download the free Socios app. When it was downloaded they had to provide a name and email address for verification and to create a virtual Socios wallet to obtain the free, non-tradable Fan Token and store it. There was no charge for that and members were not asked to provide payment details. No payment, traditional or cryptocurrency, was needed to obtain the free Fan Token and it could not be used as an investment since it was non-tradable and non-transferable. While users of the Socios app could purchase additional transferable and tradable Fan Tokens using cryptocurrency, they had to provide payment details to do so, which was a separate and additional step, unrelated to the ability to claim the free, non-transferable Fan Token.Arsenal said ad (a) did appear after ad (b) but it did not encourage supporters to obtain more than one Fan Token and vote in the poll highlighted in the ad. The free, non-tradable Fan Token was available from the day ad (a) was published and for two weeks afterwards.
Arsenal believed ad (a) did not encourage supporters to purchase or invest in paid-for Fan Tokens and deliberately avoided any investment-style language. The ad avoided claiming or implying the Fan Token could be used for anything other than the poll highlighted in the ad. Therefore, they believed the ad did not trivialise the ability to use paid-for Fan Tokens for investment opportunities.
Arsenal acknowledged that paid-for Fan Tokens could potentially be purchased via the Socios app and they could be traded and used for investment purposes. Therefore they agreed paid-for Fan Tokens could be considered investment, as opposed to free, non-tradable Fan Tokens.
Arsenal said that even if the ASA disagreed with Arsenal’s view that the ads did not promote Fan Tokens as a form of financial investment, there was no express requirement in the CAP Code, ASA guidance or cryptoasset rulings for advertisers to explain to consumers that Capital Gains Tax (CGT) might be payable on profits from financial investments. They said further to that they could find no ASA decision or guidance note requiring advertisers to provide a warning about CGT for financial investment ads more generally. Arsenal said that it should not be sanctioned for failing to include a warning about CGT when there was no regulatory requirement to include that information.
Arsenal said the requirement to provide a CGT warning in ads relating to an unregulated investment went beyond Financial Conduct Authority (FCA) standards for regulated investments. They explained that the rules in chapter 4 of the Conduct of Business sourcebook did not require investment firms to warn clients of potential tax implications for regulated investments. They said that requiring the warning in cryptoassets ads would counter-intuitively hold the promotion of unregulated products to stricter standards than was required by the FCA for the promotion of regulated financial products. In addition not to include that information in the ad was not “materially misleading” when considering the average, reasonably well-informed, observant and circumspect consumer.Arsenal said because ad (a) only referred to the free, non-tradeable token, where it was not possible to make a profit or a loss, omitting a warning about CGT was not misleading. To include such a warning might confuse consumers and mislead them into thinking that it was possible to trade and make a profit from a free, non-tradable Fan Token.
Arsenal said because the ads did not promote Fan Tokens as cryptocurrency investments or as a way to make money, in their view there was no requirement for them to include information about the potential for CGT to be paid on any profits made on selling the Fan Tokens. They said to include any such messaging could have potentially confused and misled consumers about the nature and purpose of Fan Tokens as promoted by the club.
The ASA understood that there were two versions of the Fan Token. One, available to existing Arsenal members only, which was free, and could not be transferred from the owner or traded and therefore was not considered an investment. To obtain the free token a consumer had to login to their Arsenal account, redeem a voucher code, download the Socios app, create an account and a crypto wallet and enter the voucher code. The second was paid-for Fan Tokens which were available both to members and to the general public. They could be obtained by downloading the Socios app, setting up an account and a crypto wallet, buying the cryptocurrency $CHZ with either a debit card or credit card and then exchanging $CHZ for the Fan Token. They could be transferred, and were tradeable at fluctuating prices and therefore were considered an investment. Holders of both kinds of tokens also enjoyed rights to vote on certain club decisions and the voting rights of holders increased in line with the amount of fan tokens that they owned.Whilst we noted that Arsenal said ad (a) was only intended to promote free Fan Tokens, we considered that both ads (a) and (b) were promoting both free and paid-for Fan Tokens. In particular, we noted that ad (a) was contextualised by a series of social media posts which promoted paid-for Fan Tokens and that ad (a) appeared on the same day that paid-for Fan Tokens became available for sale. Ad (a) also referenced $CHZ which was the shortened name for Chiliz, the cryptocurrency used to purchase paid-for Fan Tokens. Further to this ad (a) was posted on Arsenal’s general Facebook account and therefore was not targeted only at members by either the placement or the content, and it did not mention the free coin or the specific process a member would have had to follow to get the free token.
The CAP Code required that marketing communications for investments made clear that the value of investments was variable and, unless guaranteed, could go down as well as up. It also required that significant limitations and qualifications were stated and presented clearly. We understood that paid-for Fan Tokens were a cryptoasset and could be used as an investment, even if not marketed as a product that could generate a return. We also considered that paid-for Fan Tokens were cryptoassets which were a volatile investment, subject to frequent change and one that could potentially lead to large losses.
The ads appeared on the Arsenal website and Facebook page and were therefore likely to have been seen by a general audience including consumers who did not have financial knowledge and experience of cryptoassets. We considered consumers would expect that the exchange of paid-for Fan Tokens would be regulated, with legal protection in place for investment activities. We understood, however, that cryptoasset services in general were not regulated within the UK, and therefore consumers could not seek recourse to services such as the Financial Services Compensation Scheme or the Financial Ombudsman Service.
We acknowledged that ad (a) was posted a week after ad (b), which contained some information about Chiliz being a cryptocurrency and the risks involved. However, there was no guarantee that Facebook users had previously engaged with ab (b), and ad (a) itself had no warning about the risks of paid-for Fan Tokens.
We further acknowledged that ad (b) included text which indicated that the value of paid-for Fan Tokens could go down and that consumers could lose some or all of the money they invested. However, that risk warning was at the bottom of ad (b) and we considered it was possible for consumers to engage further without seeing it. In addition we noted the warning did not make consumers aware that paid-for Fan Tokens were unregulated in the UK.
Therefore, because ad (a) did not include any risk warning making consumers aware that paid-for Fan Tokens were cryptoassets which were unregulated in the UK and cryptoassets could go down as well as up, and because the risk warning in ad (b) was not prominent and did not state that paid-for Fan Tokens were cryptoassets which were unregulated in the UK, we concluded the ads were misleading.
On that point, the ads breached CAP Code (Edition 12) rules 3.1 3.1 Advertisements must not materially mislead or be likely to do so. and 3.3 3.3 For advertisements that quote prices for an advertised product or service, material information [for the purposes of rule 3.2] includes: (Misleading advertising), 3.9 3.9 Broadcasters must hold documentary evidence to prove claims that the audience is likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Qualification) and 14.4 14.4 Financial promotions or other advertisements for regulated activities may be broadcast if: (Financial products).
Ad (a) only referred to Fan Tokens as a “token”, it included no warnings about the risks associated with cryptoassets, it did not state that Fan Tokens were cryptoassets, or that to buy paid-for Fan Tokens consumers had to first purchase another cryptocurrency, Chiliz. We therefore considered consumers were unlikely to understand that the ad referred to cryptoassets.To obtain the free Fan Token a consumer had to download the Socios app, set up an account and download a cryptoasset wallet. Socios was a cryptoexchange account and by registering, it allowed the user to purchase paid-for Fan Tokens in the future. We considered that free Fan Tokens were therefore cryptoassets, albeit non-tradeable. Therefore, we considered that was material information that consumers needed in order to be able to make an informed decision to enquire further. We noted that ad (a) did not explain that free Fan Tokens were cryptoassets or that obtaining a free Fan Token required the consumer to open up a cryptoasset exchange account and therefore we concluded the ad was misleading on that basis.
Paid-for Fan Tokens had to be bought by first purchasing a cryptocurrency; and we considered that was material information that consumers needed in order to make an informed decision to enquire further. We acknowledged that the Socios app explained that to purchase paid-for Fan Tokens it was necessary to buy the cryptocurrency Chiliz. However, the ad linked to the Socios log-in page, which had no immediate information about cryptoassets. In addition, we considered that the ad itself should have included that information.
Because ad (a) did not include material information that paid-for Fan Tokens had to be exchanged with another cryptocurrency, we concluded the ad was also misleading on that basis.
On that point, ad (a) breached CAP Code (Edition 12) rules 3.1 3.1 Advertisements must not materially mislead or be likely to do so. and 3.3 3.3 For advertisements that quote prices for an advertised product or service, material information [for the purposes of rule 3.2] includes: (Misleading advertising), 3.9 3.9 Broadcasters must hold documentary evidence to prove claims that the audience is likely to regard as objective and that are capable of objective substantiation. The ASA may regard claims as misleading in the absence of adequate substantiation. (Qualification).
Guidance published by the FCA stated that utility tokens could be redeemed for access to a specific product or service and therefore differed from other unregulated cryptoassets such as Bitcoin, which were primarily used as a means of exchange. However, they were nevertheless categorised by the FCA as cryptoassets, as were cryptocurrencies, and as such the ASA considered paid-for Fan Tokens could be used as a form of investment, regardless of how they were promoted. In addition while we noted Arsenal’s comment that the trading facility for Socios was not available when the ads were published, thereby preventing consumers trading Fan Tokens for six weeks, the ads had continued to remain live, when trading on Socios was available and had been for a number of months.
We considered the decision to open a cryptoasset exchange account, with the potential to engage with and invest in such a financial product, was one that required careful thought and consideration. We noted that Arsenal members would receive one free Fan Token. However, to use the token a consumer had to sign up for a Socios account and that would give users the potential to buy and trade more tokens in the future. We further understood that paid for cryptoassets were a complex and sophisticated investment, subject to frequent change in value and one that could potentially lead to large losses.
We acknowledged that ad (b) stated that consumers only needed one token to vote in Club decisions, that consumers should only buy what they could afford and to seek independent financial advice if needed. However, we noted that this information was not included in ad (a). Nonetheless we considered the advertising of both free and paid-for Fan Tokens in ads (a) and (b), and as a way to influence the song played when Arsenal won a match in ad (a), in the absence of a suitably prominent risk warning, encouraged consumers to open up a crypto exchange account to acquire free Fan Tokens. It also encouraged them to engage in high-risk investment through the purchase of paid-for Fan Tokens without consideration, and trivialised what was a serious and potentially costly financial decision.
We noted Arsenal’s comments that there was no current regulatory basis to include information in ads that consumers could become liable for a CGT charge as a result of investment gains in cryptoassets or any regulated investments. We considered, however, that the Fan Tokens offered by Arsenal in the ads were not regulated by the FCA and therefore not subject to the FCA’s financial promotions rules. We also considered that consumers would be far less likely to be familiar with the tax implications of cryptoassets in comparison to long established FCA regulated investments such as ISAs or shares. Therefore most consumers were unlikely to be aware that CGT had to be paid on profits from the sale of paid-for Fan Tokens in excess of the annual CGT allowance.
We acknowledged that the ads did not promote Fan Tokens as an investment or financial product; however, Fan Tokens were cryptoassets regardless of how they were promoted and the ads did not contain any information that CGT could be payable on profits from the sale of paid-for Fan Tokens. We therefore considered the potential tax implications were not made sufficiently clear to consumers considering investing in paid-for Fan Tokens.
Therefore, because the ads trivialised investment in cryptoassets and took advantage of consumers’ inexperience or credulity by not making clear that CGT could be payable on profits from investing in paid-for Fan Tokens, we concluded the ads were irresponsible and breached the Code.
On that point, the ads breached CAP Code (Edition 12) rules 1.3 1.3 Advertisements must comply with the law and broadcasters must make that a condition of acceptance. (Social responsibility), and 14.1 14.1 Radio Central Copy Clearance – Radio broadcasters must ensure advertisements for consumer credit, investment and complex financial products and services are centrally cleared. (Financial products).
The ads must not appear again in the form complained about. We told Arsenal Football Club plc to ensure that they made sufficiently clear that the value of investments in paid-for Fan Tokens was variable and as cryptoassets they were unregulated. We also told them to ensure that they did not mislead consumers by omitting material information in their ads, including that free fan tokens would require a consumer to open up a cryptoassets exchange account and that paid-for Fan Tokens were a cryptoasset that had to be bought using another cryptocurrency. We told them to ensure that their future ads did not trivialise investment in cryptoassets by omitting appropriate and prominent risk warnings and did not irresponsibly take advantage of consumers’ lack of experience or credulity by not making clear that CGT could be due on cryptoasset profits.